US SEC CLEARS WAY FOR CANNABIS EFTs
On Friday, May 5th, Cambria Investment Management filed an N-1A form with the US Securities and Exchange Commission (SEC) for not just one, but five new ETFs. The diverse basket of proposed funds cover a wide range of industries (real estate, cannabis, robotics and AI), and also include two tax optimized funds – one domestic and one foreign.
The stand-out of the bunch – and the one that is perhaps kicking up the most attention – is the Cambria Marijuana Industry ETF. The proposed fund, if successfully launched by Cambria, will be given the ticker “TOKE.”
Cambria’s Marijuana ETF will track publicly traded companies that support or directly work in the legal production of cannabis, including: companies that legally produce marijuana, those that conduct legal research into its medical or pharmaceutical use, and those that design and manufacture equipment used in the marijuana sector.
While it may be the first cleverly-named marijuana ETF, TOKE is not the first ETF to deal in cannabis-related stocks. The proposed fund will follow on the heels of the first-ever marijuana ETF, the Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ) – which launched at $10.00 per share last month and is now sitting at $9.59. While the fund trades in Canada, American investors have been able to get in on the action via its listing on the OTC.
Horizon’s ETF isn’t alone, either. In February, a filing popped up for a fund called the Emerging AgroSphere ETF. The proposed fund, which comes from New Jersey-based ETF Managers Group, will include companies exclusively in the medical marijuana space and – if approved – will list on the NYSE Arca.
Both HMMJ and the Emerging AgroSphere ETF are passively managed, meaning the indexes they are based on dictate their performance. This means that TOKE has the potential to be the first actively managed ETF in North America. At the time of writing, there is no indication yet as to when the two remaining ETFs might launch.
There is still no telling how well these (hopefully) soon-to-be-launched ETFs will perform in the market, especially considering the fact that HMMJ has declined by about four percent since it began trading. But, at the same time more and more states are legalizing medical cannabis, and – according to Arcview Market Research – sales in the marijuana sector as a whole grew 30 percent in 2016 alone. The industry is also projected to triple in size over the next four years.